Does voluntary CSR disclosure and CSR performance influence earnings management? Empirical evidence from China

Zixin Zhang (), Teck Lee Yap () and Jiyoung Park ()
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Zixin Zhang: King’s College London
Teck Lee Yap: RMIT University Vietnam
Jiyoung Park: Xiamen University Malaysia

International Journal of Disclosure and Governance, 2021, vol. 18, issue 2, No 6, 178 pages

Abstract: Abstract We examine whether Chinese firms with better voluntary corporate social responsibility (CSR) disclosure and CSR performance engage in earnings management in their financial reporting. Our results show that Chinese firms with better voluntary CSR disclosure are more likely to engage in earnings management through discretionary accruals and less likely to engage in earnings management through real activities manipulation, while Chinese firms with better CSR performance are more likely to engage in earnings management through real activities manipulation and are less likely to engage in earnings management through discretionary accruals. Our evidence shows that consistent with opportunistic theory, the Chinese firms’ engagement in CSR practices is based on opportunistic incentives, and voluntary CSR disclosure and CSR performance are being used by these firms as window-dressing tools for earnings management that infringes on the benefits of firm stakeholders.

Keywords: Voluntary CSR disclosure; CSR performance; Earnings management; Discretionary accruals; Real activities manipulation; China (search for similar items in EconPapers)
JEL-codes: G34 M14 M41 M48 (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (6)

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DOI: 10.1057/s41310-021-00104-6

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